A limited liability company is a business structure providing certain protections to its members. Unlike a sole proprietorship, in which an owner has personal responsibility for company debts, in an LLC most members have at least some protection from individual liability. A further benefit is that LLCs have no legally mandated annual meeting requirements. However, it is often advantageous for an LLC to have an annual meeting, as the practice can prove beneficial in certain tax and legal scenarios.

Corporation or Partnership

The LLC structure itself is not recognized as a unique business entity by the Internal Revenue Service. As a result, when you file your taxes with the IRS you must categorize your LLC as either a corporation or a partnership, if your LLC has several members. If you file as a corporation for tax purposes, you lose the benefits of pass-through taxation that LLCs and partnerships provide. This means that your company must pay taxes at the corporate level, and then individual shareholders must pay individual taxes on any profits they receive from the company, resulting in double taxation. For this reason, many LLC owners designate their companies as partnerships for tax purposes. If you operate a single-member LLC, you may file taxes for your company as a "disregarded entity," which essentially means it will be taxed as a sole proprietorship. Regardless of the tax structure you select, your LLC will still not be legally responsible to hold annual meetings, even if you categorize your LLC as a corporation.

Operating Agreement

Several states require that an LLC include an operating agreement as a condition of recognition. The operating agreement spells out the function and purpose of the company, along with the distribution percentage of profits and losses. It is in the operating agreement that many LLCs specify an internal requirement for an annual meeting. In that sense, the LLC meeting can be "mandatory," at least if you are a partner in the LLC, although it is not legally binding.

Company Benefits

An annual meeting provides an appropriate platform to review company progress and conduct company business in an orderly fashion. Typical agenda items at an LLC annual meeting include the appointment or introduction of new partners, the review or modification of partner ownership and the discussion of company goals and objectives for the coming year.

Legal and Tax Benefits

If your LLC is ever the subject of a tax audit, you may have to prove that your company has a legitimate profit motive, particularly if you have suffered consecutive years of losses. Having a record of annual meetings can help demonstrate that your LLC was formed with a true business purpose. Similarly, if your LLC is ever involved in a lawsuit, the minutes of your annual meetings may help to defend your company against claims that it was managed irresponsibly or even illegally. Through a process known as "piercing the corporate veil," you may be personally liable for your LLC's debts if a court decides that you were not following legal formalities or if you were using business assets for personal use. Recording the details of your company's operations and activities in an annual meeting will help support your case that you intended to run the business professionally and responsibly.